The first thing you need to do is determine which type of bond you are looking for. Among the types you can choose from are: U.S. Government Securities (Treasury and Zero Coupon), corporate bonds and municipal bonds. These are briefly described below.

1. Treasury

   Treasury bonds are issued by the United States government. They are generally regarded as being the safest of all bonds in terms of default risk, although all bonds have market risk if they are sold prior to maturity (see Maturity below for a full explanation of market risk).

   Treasury bonds are taxable at the federal level, but they are state tax exempt. They pay interest twice a year, and they are available in maturities ranging from less than one year to about 30 years.

2. Zero Coupon Treasury

   Zero Coupon Bonds are bonds that do not pay interest during the life of the bond. They are bought at a discount to the maturity value. For example, you might pay $700 today to get back $1,000 in 5 years. The difference between what you pay now and what you receive in the future is your return. Zero Coupon Bonds are similar in concept to savings bonds.

   The Zero Coupon Bonds available in the Bond Screener are backed by U.S. Government bonds, so there is very little default risk. However, Zero Coupon Bonds can be quite volatile, meaning that as interest rates in the economy change, the value of a Zero Coupon Bond can increase or decrease substantially.

   If Zero Coupon Bonds are not held in a qualified plan, they are taxable each year based on how much income has accrued. Therefore, even though you get no cash, you do have to pay tax.

   Zero Coupon Treasury Securities include:

   CATS - Certificates of Accrual on Treasury Securities

   TIGRs - Treasury Investment Growth Receipts

   STRIPS - Separate Trading of Registered Interest and Principal of Securities

3. Corporate

   Corporate bonds represent debt of corporations. The bonds are fully taxable, and they are issued in maturities ranging from less than one year to about 30 years (although there are a few corporate bonds that mature in more than 30 years). They typically pay interest twice a year.

   Corporate bonds can be quite safe when they are issued by strong companies, or they can have significant risk of default when issued by weak companies. Two rating agencies, Moody's and Standard & Poors rate bonds as to the risk of default. Please see the section on safety below for a complete discussion on ratings and default risk.

4. Municipal

   Municipal bonds are issued by state, county, or city governments. They are generally exempt from federal tax, and are generally state tax-free for residents of the state in which they are issued. (This is not true for all states. Please see the discussion on states below for more information.)

   Municipal bonds pay interest twice per year. Like corporate bonds, municipal bonds can be very safe or they can carry considerable risk of default. Moody's and Standard & Poors rate municipal bonds as to credit quality, so it is possible to select safe bonds by relying on the ratings. Also, many municipal bonds carry third party insurance from very large insurance syndicates, and these insured bonds are generally regarded as being very safe from default risk. Like all bonds, municipal bonds are subject to market risk if sold before maturity. (See Maturity below for a full explanation of market risk.)

   It should also be noted that though interest is tax-exempt, any capital gains are taxed at the appropriate levels.